Four airlines complain to Chancellor that they want APD scrapped

Date added: November 17, 2011

EasyJet, Ryanair, IAG and Virgin Atlantic have written to the Chancellor to complain, yet again (and as APD will be reviewed in the Chancellor’s autumn statement next week) that they want APD cut. They are trying to make out that passenger numbers have fallen due to APD, rather than the economic recession. The “hard working family” argument is trotted out again (though most flights are taken by the rich. They, as usual, ignore the tourism deficit and the inconvenient fact that they pay no duty on fuel and no VAT on anything.

“Air Passenger Duty plays an important part in tackling aviation’s significant impact on climate change,” said Richard Dyer of Friends of the Earth. “Ministers must stand up to this unfair lobbying.”

Revenue raising

BBC transport correspondent Richard Lister said: “The chancellor put this year’s increases on hold, but a further rise of around 10% is expected next year.

“The airlines say that as the tax was first introduced to combat greenhouse gas emissions it should be abolished with the introduction of the EU’s Emissions Trading Scheme next year.

“The government is considering making changes to Air Passenger Duty, but has made clear that it regards the tax as an important way of raising revenue, and expects it to generate more than £2bn this year.”

Ryanair chief Michael O’Leary told the BBC that removing APD would not increase the airlines’ profits.

“This has nothing to do with our profits. It is paid by families, paid by passengers going on holidays,” he said.

“If it is scrapped, the money goes straight back into families’ pockets.”

Mr O’Leary also said that as a result of APD, 30 million fewer overseas visitors had come to the UK in the past five years.

He added that with UK passengers having to pay the new Emissions Trading Scheme tax from January, they will be “taxed on the double”.

Willie Walsh, chief executive of International Airlines Group, the owner of British Airways, called on Chancellor George Osborne to set up an independent review of APD.

“This tax is hugely damaging and must be scrapped,” he said.

“We challenge the chancellor to undertake an independent review, which will show that the net effect of this tax is damaging.”

Consultation process

A Treasury spokesman said: “We consulted on a range of reforms to APD, including simplifying the tax and making it fairer by extending APD to private jets.

“We will say more on this in the coming weeks.

“It is also important to remember that the UK is not the only country with an passenger duty, and unlike many other countries the UK does not levy VAT on flights.”

At the start of this month APD was reduced for direct long-haul flights from Northern Ireland, in response to competition from services in the Irish Republic, which has an Air Travel Tax of just three euros to any destination.

Four leading airline chief executives are calling on George Osborne to axe Air Passenger Duty arguing that its negative impact on the UK economy is outweighing any benefit from the revenue raised.

In a letter to the Chancellor, Carolyn McCall from easyJet, Willie Walsh from IAG, Michael O’Leary from Ryanair and Steve Ridgway from Virgin Atlantic say that what is happening in the UK mirrors what occurred in the Netherlands in 2008/09 when a similar air tax was imposed.

After a year, the levy was abandoned after a study showed that its harmful effects on the Dutch economy were nearly four times greater than the revenue it produced.

The letter highlights that passenger numbers at UK airports have fallen consecutively for the last three years to a level lower than 2004. In 2010, there were 7.4 million fewer passengers in the UK while numbers using European airports grew by 66.3 million.

The chief executives challenge the Chancellor to commission an independent report on the true economic effects of aviation tax in Britain.

APD was doubled in 2007 and hiked again in each of the last two years. The UK has the highest aviation taxes in the world.

The letter states that: “For hard-working families, APD is a tax too far for the privilege of taking a well-earned holiday. It is also a tax on tourism and a tax on business.

“Aviation doesn’t just drive exports – it is a major exporter in its own right with our airlines earning nearly £11 billion of foreign revenues every year. Tourism is one of the UK’s most important earners and is worth £115 billion to the UK economy.

“We take our responsibility to the environment very seriously and have taken steps to reduce our impact. We support emissions trading (ETS) in principle but a combination of both APD and ETS when it is introduced is unsustainable.”

Separately, a survey carried out by the airlines this week shows that 85 per cent of those asked believe that aviation is important to the recovery of the UK economy and 77 per cent believe that APD is an unfair tax.

85% believe that aviation is important in the recovery of the UK economy (36.9% ‘yes definitely’ and 48% ‘yes maybe’)

Awareness

71% had no idea that yet another APD rise was due in April 2012

78% were not aware that an economy ticket to Florida could include as much as £70 APD from April 2012

80% were unaware that a family of four could be paying over £60 APD to fly to Spain [Wow !! They would be paying £48 – that’s £12 each for the outward journey]

1. APD background In the Netherlands, a travel tax was introduced in 2008. Designed to raise £300 million per annum, it actually cost their economy over a billion pounds in the first year and the Dutch government abandoned it. Tax proposals in Denmark were withdrawn for similar reasons.

In Northern Ireland, the Treasury recently accepted that APD was distorting the economy and reduced it by 80 per cent for transatlantic passengers.

Air Passenger Duty was introduced in 1994 as a ‘green tax’ though latterly the Treasury admitted that it is ‘fundamentally a revenue raising duty’. In 2009, passengers paid £1.9 billion in APD. This rose to £2.1 billion in 2010/11 and it is forecast to rise to £3.6 billion by 2015.

In January 2007, APD in economy class was £5 for shorthaul routes and £20 for longhaul. By November 2010, rates had risen to £12 for shorthaul and £60-£85 for longhaul.

Current APD rates

Distance to capital city from London Economy/Premium Band A (less than 2000 m) £12/£24 Band B (2001m – 4000m) £60/£120 Band C (4001m – 6000m) £75/£150 Band D (6001m+) £85/£170

See also

AirportWatch says airlines must pay their fair share of the fuel tax burden

Date Added: 17th November 2011

In a letter to the Chancellor in advance of the Pre Budget Report AirportWatch has pointed out that those who travel by air have it easy compared to those who travel by car. Motorists pay 58p a litre duty on their fuel. Motorists pay a further 22p VAT on their fuel. Motorists pay 20% VAT to have their car serviced. Airlines pay NONE of these. Motorists pay 20% VAT to buy their car. Airlines pay no tax on new aircraft. APD would need to be quadrupled to compensate for the fuel duty and VAT exemptions enjoyed by the aviation industry. In 2010/11 the exemption from fuel tax and VAT was worth more than £11 billion to the airlines.